Liquor Laws: Doing business in the dry district

Friday

How things that happened in 1933 affect alcohol sales at restaurants today, and how one new law is changing things

In the fall of 2012 Patrick McCarthy trekked through Clintonville's Precinct 19B, knocking on doors.

To make matters worse, it was a presidential election year. In a swing state, no less. McCarthy wasn't pestering his neighbors because he wanted to influence their votes for the commander in chief. He simply wanted to sell bloody marys to his customers at Wildflower Cafe.

And so he hit the streets, indistinguishable from the army of seasonal political canvassers standing on the neighborhood stoops, all hoping that someone would open the door. McCarthy was tasked with collecting 250 signatures to give the voters in his precinct the right to approve or deny Wildflower Cafe's ability to sell wine and spirits.

Why so many steps? Blame the Methodists.

Dry Districts

Clintonville's dry spell started in the 1800s with Methodist-and abolitionist-Thomas Bull Jr., who set up his farm in Clinton Township, according to Mary Rodgers, president of the Clintonville Historical Society. It wasn't long before he was joined by his teetotaler friends from the East Coast-including the Westervelt family, who later moved on to establish Westerville northeast of Columbus.

"Many frontier towns had a lot of single men and making alcohol was a natural thing to do," Rodgers explains. This didn't sit well with the Methodists, who, with others, rallied for Prohibition.

What makes Clintonville and Westerville different from the rest of Central Ohio is what happened when Congress passed the 21st Amendment in 1933, repealing Prohibition. To appease voters like the Bulls and Westervelts, the final decision of whether an area was wet or dry was passed down to the local level.

"The federal government didn't want to create a situation where states wanted to leave the Union, so they decided to make it a state rule," Rodgers says. "And the state of Ohio didn't want a whole bunch of unhappy [abolitionists], so they let the precincts decide. Some areas have held out a lot longer than others."

As a result, while the majority of the rest of Columbus will happily accept a new restaurant-and its cocktail list-Clintonville offers hoops to aspiring restaurateurs in the way of its pseudo-dry precincts. (Some precincts, including Wildflower Cafe's, allow beer but not wine or liquor.)

Any time a business wants to make a change, they have to ask their entire precinct, through a general election, to make the address wet, allowing for the sale of wine, liquor, beer and/or Sunday sales.

Procuring Permits

For McCarthy, the decision to serve alcohol was in response to customer demand, as well as a financial decision. Alcoholic beverages generally have a higher profit margin than food, so selling booze is one way to help restaurants absorb the always-rising cost of food.

"We don't want to be a bar, we've never wanted to be a bar," he says. "But, obviously, there's a certain clientele that likes to have a drink with dinner. The decision to bring in alcohol was basically a no-brainer."

In November of 2012, thanks to those 250 signatures, the voters in Wildflower Cafe's precinct decided (with a majority vote of 80 percent) to vote the address wet, allowing the restaurant-and any future business in that space-to sell wine and liquor.

"It was a landslide [vote]. But we're an established business," McCarthy explains. "People know that we're not going to turn around, shut down tomorrow and a bar or strip club moves in here. Our family has been in this neighborhood for a long time."

The next challenge was to acquire wine, liquor and Sunday sale permits from Ohio's Division of Liquor Control. No matter whether a restaurant's precinct is wet or dry, this is no simple task. At time of printing, there were 48 restaurants requesting a D2 permit to sell wine in Franklin County. Only three were available.

"Beer and wine licenses are next to impossible to get from the state," says McCarthy, who hired a professional to help procure the permits needed. "We couldn't just go to the state and get a license from them."

McCarthy instead went about finding someone who already owned a license. For instance, the owner of a restaurant that has gone out of business still owns that license, and can sell it for whatever the market will bear.

The laws of supply and demand come into play, and obtaining a permit becomes a waiting game-unless a buyer has a surplus of cash. Permits can be found occasionally on Craigslist for 10 times what the state of Ohio charges for them when they're available.

Procuring the beer permit, which was acquired prior to the big election, was a little less painful for McCarthy, thanks to new Ohio legislation in the form of House Bill 243, which changed the requirements for transfer of licenses.

Prior to its passage, if a precinct had fully issued its permits, a restaurant could transfer a permit only from an area in the state that was over-issued. Now a restaurant can apply to transfer a permit from any part of the state and move it to any other part of Ohio, without worrying about quota restrictions.

This is not good news only for McCarthy, but for anyone in the restaurant industry. Matt Mullins, spokesman for the Ohio Division of Liquor Control, thinks the changes coming through the Ohio legislature, including a not-yet-passed Ohio Senate bill designed to accelerate the transfer of liquor permits, are exciting.

"Ohio laws are becoming more business-friendly," he says.

Neighborhood Hurdles

The resolve of those Methodists from the 1800s has a lasting consequence, one that goes beyond inconveniencing Clintonville's restaurant owners and contributing more knocks at the doors of its residents. The current system of voting addresses wet on a case-by-case basis favors existing business, but doesn't encourage new restaurants to move into the area.

In recent history, voters have encouraged alcohol at longtime establishments such as Smith's Deli, Kroger and Studio 35. Earlier this month, residents approved Global Gallery for wine, beer and Sunday sales as well as wine, beer, liquor and Sunday sales for Mozart's new location at 4784 N. High St.

But with the exceptions of a new Wine Bistro location near Henderson Road and the Crest Gastropub, which opened at a previously wet address on Crestview Road, Clintonville rarely sees the opening of new restaurants.

Restaurateur Elizabeth Lessner originally had her eyes set on Clintonville for Surly Girl Saloon, her popular bar and restaurant in the Short North.

"It's hard enough to open a business anywhere in Columbus, but [Clintonville being dry] is one extra barrier that makes it not nearly as attractive," Lessner says. "A lot of people don't understand that to even apply for a liquor license, you have to have a signed lease. Why sign a lease when you're not guaranteed to sell liquor? You sign a lease for five years, it goes to vote and if people say no, you're screwed. There are too many variables. It's too big of a risk."

When 60 percent of voters in its district turned down (the now closed) Scottie MacBean's request to bring in craft beer in November of 2003, Lessner and her partners decided to head south with the Surly Girl concept.

"It sent a clear message," she says. "[I said], 'I'm not even going to try.'"

Dan Miller, chair of the Clintonville Area Commission, admits the current system doesn't encourage new restaurants.

"It's definitely a hurdle that anyone that wants to open a new restaurant would have to overcome," he says.

However, he explained, Ohio law does allow for citizens to vote to change the whole precinct to allow for liquor. "If the community voted to change the whole precinct, it would make Clintonville more attractive [to businesses]," he says. "It's gotten some traction in the community, but there hasn't been enough [momentum] to make the change."

Liquid Results

Shortly after the election, McCarthy purchased the permits necessary for the coveted bloody marys on Sunday brunch. He's not done yet.

"I do not have a wine license yet," he says. "Why they have more licenses available for hard liquor than they have for wine and beer, I don't know. It's kind of crazy." McCarthy says that it could be years before an affordable wine license is available.

While the inclusion of bloody marys on his brunch menus increases the check size (and servers' tips), dinner business at Wildflower Cafe sees the greatest impact of the alcohol sales. Prior to selling beer and mixed drinks, the restaurant would have 35 to 40 covers, with 60 on a really good night. Now, the restaurant serves close to 100 people nightly.

But with a little less than $20,000 invested in the process of serving alcohol (including closing for a week of remodeling to make the space more comfortable for evening business), the restaurant has not come close to making a profit on alcohol.

"Strictly by alcohol sales, it would be a losing proposition," says McCarthy. "But our dinner business has more than doubled."

To fully recoup the costs of that initial investment, he says, the restaurant will have to sell "a lot of chicken and noodles."

UNDERSTANDING THE D'S

The Ohio Department of Commerce's Division of Liquor Control is the gatekeeper for wine, beer and liquor permits for businesses looking to sell booze in Ohio. According to Ohio liquor lawyer Mark Gutentag, the number of licenses available in each precinct is subject to a quota based on that area's population.

(One is issued for every 2,000 people for D1, D2, D3 and D5 permits.) If a permit is not available, a business owner can purchase the assets of another business (with the desired license) and apply to the state for a transfer. At that point, the cost of the permit is based on what the market will bear.

Each year, the Division of Liquor Control issues approximately 1,900 new permits, transfers roughly 1,700 permits and renews close to 25,000 permits.

We take a look at a few common permits below and what they cost when purchased from the state.

D1: Allows a bar or restaurant to serve beer to drink on site. It also allows for the sale of unopened beers for carryout until 1 a.m.

Permit fee: $376

D2: Allows a bar or restaurant to serve wine and low-proof spirits (containing 21 percent or less alcohol by volume). It also allows for the sale of unopened wine bottles for carryout until 1 a.m.

Permit fee: $564

D3: Allows a bar or restaurant to serve spirits, aka "intoxicating liquor" (containing 21 percent or more alcohol by volume). This permit does not allow for carryout, and sales are permitted only until 1 a.m.

Permit fee: $750

D3A: This extension allows for wine, beer and liquor sales until 2:30 a.m.

Permit fee: $938

D5: This coveted all-in-one permit allows for wine, beer and liquor consumption on site until 2:30 a.m.

Permit fee: $2,344

D6: Allows for Sunday alcohol sales from 10 or 11 a.m. to midnight.

Permit fee: $400-$500

BYOB: DRINK AT YOUR OWN RISK

Some restaurants choose not to get into the booze industry. Popular sentiment is that if a restaurant doesn't have a liquor license, it's fair game to bring your own booze. Drink what you want, save a few bucks and everybody wins, right?

Maybe not. According to Matt Mullins at the Division of Liquor Control, bringing any type of alcoholic beverage into an establishment that doesn't have a license is a violation of Ohio's open container law.

What's at stake? Open container is a minor misdemeanor, a waivable offense that doesn't require court time with a maximum penalty of a $100 fine.

According to Eric Wolf of the Ohio Investigative Unit, the agency responsible for enforcing open container laws, the restaurant may be at risk, as well.

"If it is obvious that a person is sitting at a table at a restaurant, and [alcohol] is in full of the waitstaff, then the establishment should have known," he explains. "We've had cases where we've issued citations to managers, cases where we've issued open containers to the patrons and those where we've done both."

Grandview restaurant Bono Pizza had a BYOB policy until the restaurant was visited by officials. "We didn't want a license," explains former owner Peggy Yerkes. "We wanted to sell our product, let the people bring in what they wanted."

Customers changed habits once they learned they couldn't drink on site. "It went to more carryout than dine-in," she says. In Bono's situation no citations were issued.